No Par Value Stock

This a type of the common stock that is issued without having a par value on the face of the stock certificate. As we know that the par value is the price of the share at which the particular share is sold by the company to its share holders. There is a theoretical liability associated with the par value of the share that is the company has to pay the difference between the par value and the market value of the share if the par value of the share falls due to certain reasons. Most of the companies try to maintain par value as low as possible to avoid the above mentioned theoretical liability. Sometimes companies are allowed to set no par value of the shares or stocks in order to avoid theoretical liability completely. If the company issues stock with no par value it is printed on the face of the stock certificate that it has no par value. When the stock with no par value is issued there is no legal liability on the company to fix a value or price of the stock instead the price of the stock is determined by the willingness of the investor to pay for the stock. In such cases the price of the stock depends upon the number of other factors such as the cash flow of the business, the position of the business in market, the competitiveness of the business and different factors like this. Moreover when a no par value stock is sold by the company it debits the cash received and credits the common stock account.

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